Rostov's model is a growth model.
Based on European experience - It is a theory based on European experience of industrialisation and therefore there is an element of functional rigidity in trying to promote industry as the only option in economic growth and these theories dismiss agriculture as a liability and as symbolic of lack of development.
The success of the Marshall plan - The theory is based on the success of the Marshall plan which was able to revive the economic growth in Europe under a stimulus package and investment by the government.
Capitalistic - Despite government intervention as in the Marshall plan, growth theories are all essentially relevant and valid in a capitalistic market-based system. The approach is now called Keynesian economics as it is rooted in classical economics. These theories assume that social development will automatically accrue from economic growth (Adam Smith's invisible hand theory).
The relevance of Growth theories - The growth theories have been very popular and have been used by almost all developing countries with varying rates of success. But their present applicability and their relevance are disputed under concept of more inclusive growth. And in countries like India Agriculture is a very important deciding factor in almost all aspects of Macro Economic parameters.
Some of the examples of growth theory are
- Rostov's model - This was more of a description of the economic transitions in development. It is more of a temporal theory
- Perroux's theory of growth poles
- Hirschman's Trickle-down theory
- Friedman's core Periphery model
- Gurnar Mirdals cumulative causation theory
The above models are about how disparities happen and not so much about how economics can use models for growth.
According to Rostov's theory, the following are five stages in the economic transition towards development of the country.
The five stages of growth
- The primitive stage
- Preconditions to takeoff
- Take off stage
- Drive towards maturity
- The stage of mass consumption
The primitive stage
- Agrarian tribal rural society
- Feudal culture
- Subsistence economy
- Largely undifferentiated in terms of poverty
Preconditions to takeoff
- Beginnings of Scientific Technology
- The emergence of educated intellectual middle-class
- Rostov sees these conditions were induced under colonial history in the developing countries
- For Europe, it was the cultural Renaissance
- It is this argument where Rostov is criticized to be ethnocentric and is seen to be justifying the colonial history as the 'white man's burden'.
- The economy is still a rural agrarian economy, but with the first green shoots of scientific modernism.
Take off stage
- The first Industries appear and there is a requirement of sustained investments from the government to make the Industries viable. This stage therefore as high public investments.
- India from the 1950s to 1990s was considered to be in the takeoff stage with large PSU's protection, and reservation for small industries with the dominant state trying to nurture a private sector.
Drive towards maturity
- Industries become more mature and increasingly Resilient
- Agriculture is in Rapid decline
- The proportion of public investment reduce and industry comes of age
- Industries and market drive the economy.
- After the 1991 reforms, India is considered to have entered this phase with the focus on regulation. The state acts as a facilitator and not as an active market player.
The stage of mass consumption
- Economy sustained by consumption pattern
- The economy is no longer dependent on industrial production patterns alone.
- The tertiary and retail sector emerges as the dominant component of the economy
- It is in the Rostovs context that we use terms such as primary sector for agriculture, secondary sector for manufacturing, and the tertiary sector for services.
Agriculture is seen to be a lack of development and the tertiary sector is seen to be the final stage of development. But such a conclusion is inappropriate because all three sectors can coexist at the same time. In developing countries like India, Agriculture is necessary and strength which can complement the industries and services sector. The theory is a deterministic theory that assumes only one sequence of events in development. It doesn't consider the possibility where the sequences may be altered. Consumption intensification need not always imply higher levels of development. Conspicuous consumption can actually breathe social restlessness as was the case in the US during the sixties and seventies.
Previous years questions
- 2018: Outline briefly the "age of mass consumption" as described by Rostov in his 'multistage
theory of growth'.
- 2003: Critically examine the stages of Economic Growth Model propounded by Rostow. Illustrate.
your answer with suitable examples.